However, within this concoction they are have been excellent investment opportunities namely energy, healthcare, mining, general industries and insurance.
What next? High yield securities have been a favourite for UK investors particularly after the TMT bubble. But now with headline inflation (RPI) in the UK rising as well as a saturation point in payout ratios we are turning neutral on yield stocks- they have probably gone as far as they can! Consequently we have gone negative on property, utilities and financials.
Conversely higher inflation in the near term leads us to recommend defensives such as pharmaceuticals and telecoms. Market volatility is another indication – Its back! Stock-picking has returned on the back of M&A activity and worsening visibility on 2006. We believe play back of this in this short-term and seek opportunities outside the UK in the long-term.
These views are independent of FactSet Ltd and are proprietary to Bobby Rakhit. For the full report and individual sector reviews and recommendations please contact rakhitreport@yahoo.co.uk.
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